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Growing U.S. production, shift to Asian markets and increased competition for investment pose challenges for Canadian industryTORONTO,
April 3, 2013 /CNW/ - While the approval of the Keystone pipeline is important, it alone is not going the fix the challenges facing
Canada's oil and gas sector, finds a new report from CIBC World Markets.
"Keystone will improve access stateside and put a cap on adverse price differentials for Western Canadian producers," says
Avery Shenfeld, chief economist at CIBC. "But recent developments in the global oil industry—from
North Dakota to
California to China—suggest that Keystone is just one of several important pieces of the puzzle for
Canada's energy sector.
"Three key trends—rising shale oil prospects stateside, the shift in consumption growth to
Asia, and a growing list of oil producing countries open to foreign participation—all pose challenges if
Canada is to maximize the value of its resource base."
The report notes that shale oil has gone from a negligible share of U.S. production five years ago, to almost a third today. At
$40-60 a barrel, the full-cycle costs of U.S. shale oil are well below that of a conventional oil sands mining operation, but above most
Middle East production. This oil is also now competing for the same channels used to transport Canadian crude to market.
"Growth in U.S. shale output, coupled with a much softer trajectory for medium term demand growth stateside, put America's net import requirements on a collision course with Canadian plans to ramp up its output by a further two million barrels a day over the balance of this decade," adds Mr. Shenfeld.